A haze hangs over the Windalco plant at Kirkvine in Jamaica in July 2014. The IMF is urging Jamaica to find a durable solution for the bauxite company's exposure to US sanctions.

The International Monetary Fund (IMF) sees emerging fiscal risks for Jamaica - the top three of which relate to the bauxite and energy sectors - which it says will have to be managed carefully so as not to derail the economic programme under way.

At the top of that list, contained in the international agency's latest review of Jamaica's standby arrangement with the fund, is Windalco, whose owner, UC, Rusal is under sanction by the United States.

The bauxite/alumina operation, which has plants in St Catherine and Manchester, was granted temporary reprieve from the sanctions, but that ended on Monday, November 12. A week and a half before that, Oleg Deripaska, the Russian founder of UC Rusal's parent company En+ Group, yielded to US pressure and stepped aside from the group.

The reprieve for Windalco provided some scope for international banks to provide financing to the company. Now, the IMF staff is encouraging the Government of Jamaica (GAJ) "to seek durable private-sector solutions to the precarious financial position of the company and mitigate the risk that the Government would need to step in and provide financing to preserve the company's operations and jobs".

The IMF report also highlights the Clarendon Alumina Production (CAP) company, the co-owner of the Jamalco plant in Clarendon, which it highlighted as having weak liquidity and solvency positions, citing a November 2017 analytical review by the auditor general. But the IMF also notes that CAP's operational efficiency has improved after technical issues were addressed at the plant.

The long-delayed upgrades to power generation, which will convert the fuel source to LNG, are now expected to begin in March 2019, the agency reported.

The IMF also cited oil refinery Petrojam, saying the oil refinery's already weak financial position took a turn for the worse with a prolonged plant shutdown. That, in turn, has led to further delays of the much-needed refinery upgrade, the agency said.

The management practices at Petrojam, which were recently in the national spotlight, sparked a review of the agency and contributed to the resignation of the portfolio minister. That administrative review is expected to be finalised by the end of January and inform changes at the refinery, the IMF said.

"Jamaica is mindful of geopolitical considerations regarding Venezuela's 49 per cent stake in Petrojam and possible implications for upgrading of the refinery. The GOJ expects the ongoing review of the entity to inform decisions that will improve governance and reduce fiscal exposure. Our authorities are also closely monitoring risks from the alumina industry, particularly regarding the Russian-owned Windalco," the IMF said.

The fund is otherwise concerned that Jamaica's shift from export free zones to the special economic zone (SEZ) regime could impact tax revenue adversely if the sector is not properly monitored.

Alongside other incentives meant to encourage investment for export, SEZ companies will pay corporate taxes at a rate of 12.5 per cent, which is half the rate paid by Jamaican companies.

The regime is already in operation, but is expected to be fully vested on January 1, 2019.

"The SEZ authority and the tax and customs administrations are committed to following operating procedures and service standards to tighten oversight - e.g., for applications, certifications, and approval of SEZ status - and ensure compliance with SEZ rules and tax and customs laws," the IMF said in the Fourth Review report.

Strong implementation is critical to avoid erosion of the tax base as operations migrate into the SEZs, the fund said.